Story first appeared on NYTimes.com.
BP, the British oil company, said on Thursday that it had agreed to pay $4.5 billion in fines and other penalties and to plead guilty to 14 criminal charges related to the rig explosion two years ago that killed 11 people and caused a giant oil spill in the Gulf of Mexico.
In a rare instance of seeking to hold individuals accountable for
company misdeeds, the Justice Department also filed criminal charges
against three BP employees in connection with the accident.
The government said that BP’s negligence in sealing an exploratory well
caused it to explode, sinking the Deepwater Horizon drill rig and
unleashing a gusher of oil that lasted for months and coated beaches all
along the Gulf Coast. The company initially tried to cover up the
severity of the spill, misleading both Congress and investors about how
quickly oil was leaking from the runaway well, according to the
settlement and related charges.
While the settlement dispels one dark cloud that has hovered over BP
since the spill, it does not resolve what is potentially the largest
penalty related to the incident: the company could owe as much as $21
billion in pollution fines under the Clean Water Act f it is found to
have been grossly negligent. Both the government and BP vowed to
vigorously contest that issue at a trial scheduled to begin in February.
Under its deal with the Justice Department, BP will pay about $4 billion
in penalties over five years. That amount includes $1.256 billion in
criminal fines, $2.394 billion to the National Fish and Wildlife
Foundation for remediation efforts and $350 million to the National
Academy of Sciences. The criminal fine is one of the largest levied by
the United States against a corporation.
BP also agreed to pay $525 million to settle civil charges by the
Securities and Exchange Commission that it misled investors about the
flow rate of oil from the well.
In addition, the company will submit to four years of government monitoring of its safety practices and ethics.
A broader settlement that would have resolved the Clean Water Act claims
failed to win agreement from some parties, in particular the state of
Louisiana. BP and the government now intend to go to trial on those
claims in February.
The government charged the top BP officers aboard the drilling rig,
Robert Kaluza and Donald Vidrine, with manslaughter in connection with
each man who died, contending that the officials were negligent in
supervising tests to seal the well.
Prosecutors also charged David Rainey, BP’s former vice president for
exploration in the Gulf of Mexico, with obstruction of Congress and
making false statements for understating the rate at which oil was
spilling from the well.
As part of its plea agreement, BP admitted that, through Mr. Rainey, it
withheld documents and provided false and misleading information in
response to the House of Representatives’ request for information on how
quickly oil was flowing. While Mr. Rainey was publicly repeating BP’s
stated estimate of 5,000 barrels of oil a day, the company’s engineering
teams were using sophisticated methods that generated significantly
higher estimates. The Flow Rate Technical Group, consisting of
government and independent scientists, later concluded that more than
60,000 barrels a day were leaking into the gulf during that time.
Lawyers for all three men charged denied that their clients had committed any criminal wrongdoing.
Mr. Holder, the attorney general, said that the government’s
investigation was continuing and that other criminal charges could be
filed.
Under the settlement announced on Thursday, BP agreed to plead guilty to
11 felony counts of misconduct or neglect related to the deaths in the
explosion. The company pleaded guilty to one misdemeanor violation of
the Clean Water Act and one misdemeanor violation of the Migratory Bird
Treaty Act. It also agreed to plead guilty to one felony count of
obstruction of Congress over its statements about the flow rate.
Shelley Anderson, whose husband, Jason, died in the Deepwater Horizon
disaster, said she was happy to hear about the settlement.But Ms. Anderson said the agreement did not change her own situation.
BP has repeatedly said it would like to reach a settlement of all claims
against it if the terms were reasonable. The unresolved claims have
been weighing on the company’s share price.
On Thursday, BP’s American shares closed at $40.30, up slightly on the day and down about 34 percent since the accident.
The settlement is one less thing to be negative on BP about and a minor
step in the right direction toward the rehabilitation of BP.
As part of Thursday’s announcement, BP said it was increasing its
reserve for costs and claims related to the spill to about $42 billion.
Brian Gilvary, BP’s chief financial officer, said in a conference call
with analysts that the board weighed the settlement struck with the
government against the prospect of a much wider criminal indictment that
would have involved more people in the company.
BP said that before Thursday’s announced payments, it spent more than
$14 billion on operational response and cleanup costs and $1 billion on
early restoration projects, and paid out more than $9 billion to
individuals, businesses and government entities.
In March, BP agreed with the lawyers for plaintiffs to settle claims of
economic loss, including from the local seafood industry, and medical
claims stemming from the oil spill. The company said it expected that
settlement to be an additional $7.8 billion, which it will pay from a
trust it set aside to cover such costs.
Until this week, the only BP employee to be arrested and indicted was a
low-level engineer, Kurt Mix, who has been charged with obstruction of
justice for deleting text messages about company estimates of the flow
rate from the spill. The government has asserted that in October 2010,
Mr. Mix, of Katy, Tex., deleted from his smartphone a string of more
than 200 messages with a supervisor about the flow rate estimated at the
time of a failed effort to contain the spill. He is also accused of
deleting a second string of messages with a contractor in August 2011.
Mr. Mix has pleaded not guilty to both counts of impeding a grand jury
investigation, saying that the deletions were routine and that other
records of the communications still existed.
David Yarnold, chief executive of the National Audubon Society, said
Thursday’s settlement matches the unprecedented offense BP committed.
But BP needs to compensate the Gulf Coast in the form of civil
damages, he said.
The company could still face billions of dollars in penalties under the
Oil Pollution Act or the Clean Water Act. This possibility has spurred
political jockeying between the Obama administration and Gulf Coast
politicians who want to maximize the amount of money the states receive
to help local communities affected by the spill.
Under the Clean Water Act, fines could range from $1,100 for every
barrel spilled through simple negligence to as much as $4,300 a barrel
if the company were found to have been grossly negligent. With an
estimated 4.9 million barrels of oil spilled in the accident, the
company faces liabilities of as much as $5.4 billion to $21 billion.
Gulf Coast lawmakers passed legislation called the Restore Act last
summer under which 80 percent of fines paid by BP under the Clean Water
Act would go to gulf communities.
The Justice Department could also levy fines under a provision of the
Oil Pollution Act, in which case BP would face a bigger penalty — more
than $31 billion — to repair damages. But BP would be allowed to take a
tax deduction for damages paid, and federal agencies would control how
the fine money was spent.
While the government will no longer be able to hold the threat of
criminal charges over BP in negotiations about a civil fine, its quiver
is not empty.
Brandon L. Garrett, a law professor at the University of Virginia who
studies corporate prosecutions, said the government could still invoke
the threat of “debarment,” or disqualification from getting federal
contracts. Although debarment is rare, he said, that could be a very
large blow both to reputation and to business BP does with the federal
government.
Two other companies involved in the Gulf of Mexico accident, the rig
operator Transocean and the cement contractor Halliburton, also face
potential civil and criminal liabilities.
